Whistleblowers under Sarbanes-Oxley and Dodd-Frank
Whistleblowers under Sarbanes-Oxley and Dodd-Frank

Whistleblowers under Sarbanes-Oxley and Dodd-Frank

The Sarbanes-Oxley Act of 2002 mandates certain requirements for the reliability and usefulness of financial reporting by publicly traded companies. It prohibits an employer whose securities must be registered under federal securities laws from discharging, discriminating against or retaliating against an employee for reporting employer conduct that the employee believes violates federal securities, mail fraud, wire fraud or bank fraud laws or for assisting an SEC investigation.

Another federal law, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), protects whistleblowers from adverse employment actions, including termination, for making certain disclosures required under Sarbanes-Oxley. According to SEC regulations interpreting Dodd-Frank and some federal district court opinions, including one from the Northern District of California, protection extends to individuals who make reports internally, such as to management, even if they do not make reports externally to the SEC.

To prove a claim for whistleblowing in violation of Sarbanes-Oxley or Dodd-Frank, the employee must show that: (1) the employee engaged in protected activity; (2) the employer knew that the employee engaged in protected activity; (3) the employee suffered an adverse action; and (4) the protected activity was a “contributing factor” in the adverse action. The last factor may be inferred from timing alone where an adverse employment action follows on the heels of protected activity.

An employee who prevails is entitled to “all relief necessary to make the employee whole,” including reinstatement with the same seniority status, lost wages, any special damages sustained, and litigation costs, including attorneys’ fees. Under Dodd-Frank, remedies include double lost wages.

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